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Knock-down kit

A knock-down kit is a kit containing the parts needed to assemble a product. The parts are typically manufactured in one country or region, then exported to another country or region for final assembly. Variant names include knockdown kit, knocked-down kit, or simply knockdown, and the abbreviated KD or CKD.

A common form of knock-down is a complete knock-down (CKD), which is a kit of the completely non-assembled parts of a product. It is also a method of supplying parts to a market, particularly in shipping to foreign nations, and serves as a way of counting or pricing.[1] CKD is a common practice in the automotive, bus, heavy truck and rail vehicle industries, as well as electronics, furniture and other products. Businesses sell knocked-down kits to their foreign affiliates or licensees for various reasons, including the avoidance of import taxes, to receive tax preferences for providing local manufacturing jobs, or even to be considered as a bidder at all (for example, in public transport projects with "buy national" rules).

A semi-knocked-down kit (SKD) is a kit of the partially assembled parts of a product. It is also called an incompletely disassembled kit, although it has never been assembled. Both types of KDs, complete and incomplete, are collectively referred to within the auto industry as KDX (for knocked-down export), and cars assembled in the country of origin and exported whole to the destination market are known as BUX (for built-up export).

Technically, the terms "knock-down", "incompletely disassembled kit" and "kits of parts" are both misnomers, because the knock-downs were never built up in the first place, and the shipments of parts are often not in the form of kits,[1] but rather bulk-packed by type of part into shipping containers. The degree of "knock-down" depends on the desires and technical abilities of the receiving organization, or on government import regulations.[1] Developing nations may pursue trade and economic policies that call for import substitution or local content regulations. Companies with CKD operations help the country substitute the finished products it imports with locally assembled substitutes.

Knock-down kit assembling plants are less expensive to establish and maintain, because they do not need modern robotic equipment, and the workforce is usually much less expensive in comparison to the home country. The plants may also be effective for low-volume production. The CKD concept allows firms in developing markets to gain expertise in a particular industry. At the same time, the CKD kit exporting company gains new markets that would otherwise be closed.[2]

Contents

In the automotive industry, the most basic form of a vehicle in KD kit lacks the wheels, internal combustion engine, transmission, and battery.[citation needed] They are either supplied as parts for assembly (a "complete" kit), or obtained from third parties (an "incomplete" kit); all of the interiors are already installed at the originating factory. The term SKD for semi-knocked-down refers to a kit with a complete, welded car body, usually coated or already painted. To gain some extra tax preferences, the manufacturer needs to further localise the car, i.e. increase the share of parts produced by local manufacturers, such as tires, wheels, seats, headlights, windscreens and glass, batteries, interior plastics, etc., even down to the engine and transmission. At some point, the steel body could be pressed, welded, and painted locally, which effectively makes KD assembly only a couple of steps away from full-scale production.

By the time that Henry Ford co-wrote his 1922 memoir My Life and Work, the Ford Motor Company was already shipping car parts from its Michigan plants for final assembly in the regions of the United States or foreign countries where the cars would be sold.[3]

During World War II, a great number of U.S. and Canadian-built vehicles — most notably light and heavy trucks like Willys MB/Ford GPW/GPA, GMC-353/CCKW and vehicles from the CMP family — were crated and shipped overseas in KD form, in various degrees of completeness, to Allied countries, in order to sustain their war effort. Assembly lines were preferably set up in local automotive factories where appropriate tooling and equipment could be easily found but, where needed, other types of buildings could be used, especially in on-the-field situations, and on occasion even open-air rebuilding camps were set up, managed by military personnel. Owing to male mobilization, sometimes a female workforce was employed. CKD military vehicles could be stored for shipment in one-vehicle-per-crate form (or SUP, Single Unit Pack), or as several vehicles (usually two to three) divided in two or more crates. Vehicles shipped to certain countries could be lacking some items, such as cabs, beds or tires, that were built and provided locally.[4][5]

By 1959, and with the introduction of the Mini, the products of BMC were still either imported or assembled from CKD kits in several international markets.

In 1961, Renault began negotiations for a first partnership agreement with AMC for assembly of Rambler automobiles in Europe.[6] Beginning in 1962, and continuing until 1967, AMC also sold CKD kits of its passenger cars to Renault. They were assembled in Renault's factory in Haren, Belgium and sold through its dealers in Algeria, Austria, Belgium, France, the Netherlands, and Luxembourg. The deal allowed AMC to sell its cars in new markets without having to make a major Foreign Direct Investment (FDI). The arrangement was good for the French automaker because its product range was lacking large cars and it needed to offer an "executive" model in its European markets.[7] The situation had changed by 1977. It was now AMC that sought outside support for a new car in the United States sub-compact market segment, which led to the first of many agreements with Renault.

Volvo's Halifax Assembly Plant, which opened 1963, completed vehicles in CKD form from Sweden for North American consumers. Halifax Assembly closed in December 1998.

In 1967, Rootes Group UK began exporting CKD Hillman Hunters to Iran where they were sold as the Paykan (meaning "arrow" in Persian). Bought by Chrysler in 1967 and then part of the sale to the PSA Group by the Chrysler Corporation of its European operations in late 1978, the Rootes business basis in Iran became the primer for the very significant PSA Peugeot Citroën business in Iran involving engine and CKD deliveries, particularly from the 405, introduced in 1990 and facelifted as the Pars in 1999 and 206 introduced in 2001.[8] In 2004, Peugeot's partner Iran Khodro produced 281'000 Peugeot vehicles, securing a 36% market share.

In 1967 as well, Peugeot introduced CKD-based production of a light pick-up vehicle based on the Peugeot 403 in Peugeot's Berazategui factory (in Buenos Aires) under the name Peugeot 4TB.[9] In 1973, this model was replaced by the 404 pick-up and later (1990) by the 504 pick-up. The 404 and 504 were massively marketed worldwide through local CKD assembly shops: the 404 was assembled, besides France and Argentina, in Australia, Belgium, Canada (at the SOMA plant shared with Renault), Chile, Ireland, Kenya, Madagascar, Malaysia, New Zealand, Nigeria, Portugal, Perú, Rhodesia, South Africa and Uruguay;[10] the 504, mainly in Argentina, Egypt, Nigeria, Kenya, South-Africa, Australia and China by the Guangzhou Peugeot Automobile Company which developed a specific crew cab version.

In 1968, the independent German automotive firm, Karmann, began assembly of CKD kits of AMC's newly introduced Javelin for distribution in Europe. American Motors also provided right hand drive versions of their automobiles to markets such as Australia, New Zealand, and South Africa. The components were shipped in containers to Australia from AMC's plants in Kenosha, Wisconsin, or Brampton, Ontario. Assembly of Rambler and AMC vehicles in Australia was done by Australian Motor Industries (AMI) in Port Melbourne, Victoria. Local content requirements were met by using Australian suppliers for the interiors (seats, carpeting, etc.) as well as for lights, heaters, and other components. Various Rambler models were assembled in New Zealand from the early 1960s until 1971 by Campbell Motors in Thames (later Toyota New Zealand), which had also built Toyota, Datsun, Hino, Renault, and Peugeot cars.

New Zealand had developed a car assembly industry [11] as a means of import substitution and providing local employment, despite the small size of the local market. Following economic reforms in the 1980s, including the lowering of import tariffs, the ability to import Australian-built vehicles duty-free under the CER agreement, many car companies ended assembly in New Zealand and switched to importing completely built up vehicles from Japan, Australia, or Europe. More significantly, the easing of import restrictions led to a large number of Japanese used imports, which were far cheaper than locally assembled used cars, and continue to outnumber so-called 'NZ New' vehicles. The last companies to assemble CKD kits in New Zealand were Toyota, Nissan, Mitsubishi, and Honda, which closed their plants in 1998, when the government announced plans to abolish import tariffs on cars.

In 2009, Mahindra & Mahindra Limited announced that it would export pickup trucks powered by diesel engines from India to the United States in knockdown kit (CKD) form, again to circumvent the chicken tax.[14] Mahindra planned to export CKDs to the United States as complete vehicles that will be assembled in the United States from kits of parts shipped in crates.[14] However, Mahindra's United States CKD and export plans never materialized and were subject to several lawsuits.

Since 2013 Tesla operates an assembly plant in Tilburg, Netherlands.[15] It is used for the assembly of their fully electric Model S sedan and Model X SUV for the European Union, but not all of Europe since only cars imported to the EU benefit from circumventing the 10% import duty[16] (e.g. cars to Norway are shipped directly from the United States). For the most part the car is still manufactured in the Tesla Factory in Fremont, California. During the final assembly in the Netherlands various parts are added to the car most notably the rear subframe with the drive train as well as the battery pack.[17]

Motor Coach Industries opened its Pembina, North Dakota, assembly plant in 1963, as part of an expansion into the U.S. market. Unfinished KD (knocked down) coach bodies are shipped from Winnipeg, Manitoba, by flatbed trailer and completed, outfitted and delivered at Pembina. This practice simplifies U.S. Customs and meet the "Buy America Act" provisions (49 USC 5323(j) and 49 CFR Part 661) for public agencies purchasing new equipment with federal funds.[18]

The practice of selling "knocked down" railcars, called by that name, pre-dates the 20th century, as evidenced by an advertisement by J. G. Brill and Company in the Street Railway Journal from 1898.[19]

Many rail equipment builders have used kits or incomplete vehicles, often to meet local assembly and production requirements or quotas, or to satisfy tariffs. Some examples include:

Bombardier ships incomplete cars from its plant at La Pocatière, Quebec, to Plattsburgh, New York, and (until 2002) Barre, Vermont, facilities for final assembly. These are to meet "Buy America Act" provisions for U.S. public transit agencies and tariff rules. Since 2009 the Plattsburgh assembly plant has full stainless steel welding and fabrication capability, allowing for cars to be fully assembled and completed on site.

Alstom's Hornell, New York, assembly plant produces final completed cars using stainless body assemblies shipped from the Lapa plant in Sao Paulo, Brazil. The same production method was used by Morrison Knudsen when it built new passenger cars at the Hornell shops in the 1990s.

The European aircraft manufacturer Airbus uses knock-down kits to assemble A320 family aircraft outside Europe. The Airbus A320 final assembly line in Tianjin, China assembles fuselage, wing, and tail sections made in Europe with avionics and engines made in Europe or the United States and locally sourced components for interiors. Airbus has opened a similar A320 final assembly line in the United States in September 2015, located in Mobile, Alabama; again using European-made fuselages, wings, and tail sections. However, the Mobile final assembly line will use more locally sourced components than the Tianjin line; engines, interior components, and avionics will be sourced mainly from American suppliers.[citation needed] Both the Airbus Tianjin and Mobile plants receive their fuselages, wings, and tail sections from Europe via ocean freight using specially designed ships, as the plants are located in port cities.